Sri Lanka says around 37 dead in Tiger clash

COLOMBO, June 17 (Reuters) - Sri Lanka's military said around 37 people were killed in a sea and land battle with Tamil Tiger rebels on Saturday, and three suspected rebels in diving gear were seized at a beach near the capital's airport.

Sri Lankan government jets hit targets near the Liberation Tigers of Tamil Eelam (LTTE) stronghold Kilinochchi overnight in retaliation for an attack on a bus earlier this week that killed 64, the worst incident since a 2002 truce halted two decades of war. The Tigers deny the bus attack.

"Eight LTTE boats destroyed by naval fire," a military spokesman said, revising down an earlier figure of 11. "Six navy sailors died. We have around 30 deaths of LTTE. Navy and police have witnessed the bodies. One civilian succumbed to his wounds. Three naval craft slightly damaged."

Attack helicopters were joining the military in searching for more rebel craft, he said. Death tolls could not be independently confirmed. Pro-rebel Web site Tamilnet said five civilians had been killed and 44 wounded.

International truce monitors in the northwest Mannar district said they heard heavy firing, much more serious than the hit-and-run attacks that have become commonplace in the last two months as the truce collapsed into low intensity conflict.

Each side blamed the other for hitting a church that was sheltering civilians trying to flee the conflict to India.

The military said rebels had thrown grenades into it as they withdrew, wounding civilians. But rebel media coordinator Daya Master said the military had shelled the church.

BLAST NEAR AIRPORT

There has been a sharp increase in violence since early April and almost 700 people have died this year. So far trouble has largely been confined to the north and east, where the Tigers want a separate Tamil homeland.

A defence spokesman said three suspected rebels in diving gear were seized in Pamunugama, some 18 km (10 miles) north of Colombo near the resort town of Negombo. They were about 10 km (6 miles) from the international airport.

All were arrested, but two took cyanide capsules and were taken to hospital, he said. As the third diver was seized, a large underwater explosion took place a few metres off the beach, a witness said, shattering some nearby windows.

"It was just off the reef," he told Reuters from the scene. He did not give his name. "It was a massive explosion. It sprayed water for a 50-metre (yard) radius."

Analysts fear attacks on civilian or military targets, trying to pressure the government into concessions.

A 2001 suicide attack on the airport destroyed half the Sri Lankan Airlines fleet on the ground, smashing tourism and economic confidence.

Both sides have repeatedly said they want peace, but diplomats say neither has shown the flexibility needed to make concessions. Earlier in the month, the Tigers walked out of talks in Norway without even meeting the government delegation.

The bus attack on Thursday provoked the government into launching its heaviest air raids on rebel territory since the ceasefire. Analysts had worried that would provoke a heavy Tiger retaliation that could escalate to full-scale war. (Additional reporting by Ranga Sirilal)

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